Economists believe that the consumer price index, which does not include food and fuel, is a better estimate of underlying inflation. It increased 3.8% in December compared to the same month last year.
The fact that this would be the lowest annual gain since May 2021 shows how far the Fed has come in reducing inflation, which in 2022 grew at its quickest rate in forty years.
Even while price growth is still over the central bank’s target, the most recent report from their December meeting indicates that policymakers are inclined to cut borrowing costs this year and accept that interest rates have probably peaked.
“We expect core-goods price deflation to continue to weigh on headline and core; however, if businesses are successful in reducing inventory, that source of disinflation will lessen in the coming months.” Even if the rate of housing inflation slows down, core CPI inflation is still expected to remain stubbornly high beyond the Fed’s 2% objective for average inflation until 2024.
The economists Anna Wong, Stuart Paul, Eliza Winger, and Estelle Ou. Click here for a complete preview.
The producer price index will be released the day after the government’s CPI data, which is released on Thursday. On a yearly basis, there is also a cooling of the wholesale inflation measure, which does not include food and energy.
Raphael Bostic of the Atlanta Fed and John Williams of the New York Fed are two US central bankers who will be speaking this coming week.
Investor attention will also be maintained by statistics on growth in the UK, industrial numbers from Germany, and central bank decisions from South Korea to Peru.
For a recap of last week’s events, click here. Below is our outlook for the world economy.
Asia
On Thursday, the Bank of Korea will make its first rate decision of 2024 for the Asia-Pacific region.
Instead of anticipating a shift in South Korea’s policies, economists believe that the country’s policymakers will continue to maintain its hawkish stance even as the Fed gradually starts to shift in the opposite direction.
The Bank of Japan receives some important data to interpret. Tokyo consumer prices, a leading predictor of the overall trend in the country, are predicted to indicate a slowdown in inflation in December on Tuesday.
Household expenditure most likely declined again on that day as well in November, and the following facts may help explain why: Pay increases continue to fall behind increases in living expenses.
Building approvals and retail sales data are expected in Australia on Tuesday and Wednesday, respectively. On Thursday, trade data is expected, and on Wednesday, inflation data.
Friday brings the consumer and producer prices from China as well as the industrial production and consumer inflation figures for December and November, respectively, from India. Trade figures for the Philippines are expected on Monday through Thursday.
In the upcoming week, when industrial data is issued in the euro zone’s main nations, manufacturing statistics will be the focus of most interest.
The largest member of the euro zone, Germany, will most importantly announce output figures on Tuesday and industrial orders on Monday.
Economists predict that both of those indicators will show modest increases in November from levels that were at or close to the lowest in three years, during a quarter in which the majority of people believed the nation was in a recession.
The two most important indicators for the euro area as a whole could be unemployment on Tuesday and economic optimism on Monday.
As is customary, the European Central Bank starts the year discreetly in 2024. Just a few appearances are planned: on Tuesday, Vice President Luis de Guindos and Executive Board member Isabel Schnabel will speak; on Wednesday, ECB chief economist Philip Lane will speak; and on Friday, French central bank president Francois Villeroy de Galhau will speak.
In the UK, on Wednesday, Governor Andrew Bailey of the Bank of England and associates speak before the parliament on financial stability. The gross domestic product for November will be announced two days later. Economists anticipate a minor recovery from October’s decline.
The newest data on consumer price increase in Hungary is scheduled to be revealed on the same day. Economists predict a decline to 5.9%. That is still quicker than every member of the euro zone except Slovakia, which is a neighbour.
As for Czech monetary easing this year, Vice Governor Eva Zamrazilova stated on Sunday that it will depend on how quickly inflation approaches the central bank’s objective.
Russia’s December inflation figures are expected to be released on Friday, and while officials had projected 4%, an outcome exceeding 7% seems predicted.
Moving on to Africa, Ghana, the second-largest cocoa producer in the world, is expected to report on Wednesday a fifth monthly drop in inflation, partially attributable to a reasonably stable currency.
In the upcoming week, five significant Latin American economies—led by Chile on Monday—will release their December consumer prices. Monthly deflation is predicted by economists to push the annual percentage down to as low as 4.4%, which will be sufficient to maintain the central bank’s cycle of easing.
Due to expenditures tied to the holidays, inflation in Mexico may have increased for a second month, which might prolong the central bank’s hold at 11.25%.
It’s possible that Colombian inflation has significantly decreased, ending 2023 over 400 basis points below the cycle peak, which might lead to a potential half-point rate drop at the central bank’s meeting on January 31.
After missing both the 2021 and 2022 targets, experts polled by the central bank of Brazil on Thursday predicted that annual inflation would have concluded 2023 at 4.46%, significantly over the 3.25% aim but still falling within the 1.75%–4.75% target range.
In keeping with President Javier Milei’s promise to present the “uncomfortable truth” to the populace, the main spokesperson for the government of Argentina stated that monthly inflation in December is expected to be about 30%. This would indicate an annual year-end rate of 222%, up from 160% in November.
As the week comes to a conclusion, Peru’s central bank is very set to lower the main rate on Thursday for a fifth consecutive meeting, to 6.5%, as its finance minister projects that inflation will end 2024 at 2% rather than 3.24% in 2023.